Speech by Alexey Miller at the meeting of Prime Ministers of Russia and China with the business community in Beijing

Mr. Prime Minister of the Russian Federation!

Mr. Premier of the State Council of the People’s Republic of China!

Ladies and gentlemen!

I am sincerely glad to address such a respectable audience during the celebrations of the 60th anniversary of the People’s Republic of China.

Russia and China are strategic partners in various areas, including, first of all, the energy industry.

Russia holds abundant hydrocarbon resources in the east, while China’s demand for energy carriers is constantly growing irrespective of the global economic situation. It is obvious that establishing long-term mutually-beneficial and partnership relations in the natural gas supplies sector is a strategic target that, if reached, will promote sustainable development of our countries.

Russia pays special attention to shaping the gas industry in Eastern Siberia and the Far East. For this purpose, the Eastern Gas Program was elaborated and approved. The strategic objective of the Program is to organize a number of new gas production centers that will be linked together with a system of gas trunklines. Among these centers are Krasnoyarsk Krai, Irkutsk Oblast, Yakutia, Sakhalin and Kamchatka.

These regions are expected to produce some 110 billion cubic meters of gas by 2020.

The Russian Federation Government has authorized Gazprom to coordinate the Eastern Gas Program execution. The Company currently holds the subsurface licenses for such major fields and areas as the Chayandinskoye field in Yakutia, the Sakhalin III project blocks, the Chikanskoye field in the Irkutsk Oblast, the Sobinskoye field in the Krasnoyarsk Krai, the Kirinskoye field offshore the Sakhalin Island and the Zapadno-Kamchatsky block on Kamchatka. So far, geological exploration and drilling activities have been initiated there.

Sakhalin II is known to be a pilot project of the Eastern Gas Program. The project made it possible to form a new energy source for Asia-Pacific markets.

Liquefied natural gas (LNG) deliveries from Sakhalin to Japan and Korea have started under long-term contracts.

The Sakhalin – Khabarovsk – Vladivostok gas pipeline is a top priority project being implemented by Gazprom as part of the Eastern Gas Program. Gazprom will complete its start-up complex in 2011. The Yakutia – Khabarovsk – Vladivostok gas transmission system, projected for construction in 2012, will be another crucial step forward.

Execution of the above mentioned projects will help deliver the required volumes of natural gas to the Far Eastern regions as well as to create preconditions for arranging and expanding natural gas supplies from Russia to China and other Asia-Pacific countries.

Gazprom and China National Petroleum Corporation have signed the Strategic Cooperation Agreement.

Based on the Agreement the standing Coordinating Committee has been set up to regularly address the issues of gas supplies and joint projects execution in gas processing and gas chemical sectors in eastern Russia and in third countries. The projects also involve cooperation in the sci-tech area.

Today another important step has been taken within the negotiations on the long-term contract for gas supply to China. The Framework Agreement has been signed on major terms and conditions for gas supplies.

The document outlines gas supply volumes, directions and start-up dates and the dependence of the price formula on the crude oil index, which is an essential element of the future legally binding contract.

Russian gas will primarily be supplied to China via the western route due to the available abundant resource base being developed and no need to create gas processing and gas chemical capacities.

Natural gas supply from Eastern Siberia has a lot of specific features. On the one hand, it offers competitive advantage, but on the other hand, it requires advanced development of gas chemical productions and marketing of gas products. Therefore, the eastern route is in the second place by importance.

At the same time Gazprom is penetrating global markets more intensively. Through pipeline gas swap arrangements the Company has made a substantial LNG portfolio and may commence LNG supplies to China as early as next year.

In conclusion, I would like to underline that both our Chinese friends and us are confident that the long-term gas supply agreement being consecutively elaborated, will fully reflect the strategic national interests of our countries and its signing will reinforce the friendly relations between Russia and China.

Thank you for your attention!

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